Decisionbar Trading Software is not a "Black-Box."
When we send out an email or post a chart on our website, we just explain that green signals are "Buy" or "Long" signals and red signal are "Sell" or "Short" signals.
Of course, there are a number of different types of signals, and how they are generated, and how you should trade the different types of signals is completely explained in our DecisionBar Trading Manual.
(In fact, if you would like a copy of the Manual, just click on the link above to download a pdf version.)
The purpose of this and the next few emails is to explain what the different signals mean so that you can better understand and evaluate the charts on our website and in the emails we send out.
Before we discuss the signals, the first thing you need to know is that the upper and lower pivots represent support and resistance.
When the market you are trading drops to a "support" level, we expect buyers to consider it a bargain and rush in to buy, causing the price to rise.
When the market you are trading rises to a "resistance" level, we expect buyers to consider it too expensive and the lack of buyers causes the price to fall.
The upper and lower pivots (support and resistance) are re-calculated on every bar except following the two signal we will discuss next.
When the market drops below the lower pivot, DecisionBar issues a "Breakdown" signal. This means that price support has broken down.
Buyers have lost confidence (fear has overcome greed) and are afraid that prices will go even lower. As buyers abandon the market, the fear of lower prices may become a self-fulfilling prophecy.
(Note: Remember that with DecisionBar, signals are "Decision Points." You must consider other factors before making the trade.)
Following a Breakdown Signal, the software stops calculating support and resistance levels, and instead monitors the downward momentum of the market. Once the downward momentum has dissipated, the software issues an "Exhaustion" signal (indicating that the downward move is "exhausted") and recalculates support and resistance.
Breakout Signals are the reverse of Breakdown Signals.
When the market you are trading moves above the upper pivot, DecisionBar issues a "Breakout" signal. This means that price resistance has given way.
Buyers are confident of higher prices (greed has taken over) and are rushing to get in before it's "too late." As buyers rush in, the expectation of higher prices may become a self-fulfilling prophecy.
Following a Breakout Signal, the software stops calculating support and resistance levels, and instead monitors the upward momentum of the market. Once the upward momentum has dissipated, the software issues an "Exhaustion" signal (indicating that the upward move is "exhausted") and starts recalculating support and resistance.
One thing to keep in mind is that broken support often becomes resistance, and broken resistance often becomes support.
We have built an algorithm into the software to allow for this without prematurely exiting the trade.
You'll note in the chart above, the the broken resistance level is re-tested before the upward move truly gains momentum.
We'll discuss Exhaustion signals in the next email. They are very interesting signals.
If you are ready to become a successful DecisionBar trader,there will never be a better time than right now to get my DecisionBar trading software.
For details and to sign-up, please visit our website at:
Les Schwartz and the Staff at DecisionBar Trading Software.